One of the centrepieces of Australia’s federal budget was a pledge to spend $75 billion over the next decade to build the roads, railways, airports and energy infrastructure, something Treasurer Scott Morrison says will strengthen the economy and bust congestion in Australia’s cities.
Sounds great, right? Just what the economy needs at a time when population growth is high and productivity low.
However, despite the apparent spending splurge, economists at ANZ Bank note that most of the newly announced projects had already been allocated funding in the 2017-18 budget, with the 2018-19 budget simply specifying where the funding is going.
“Commonwealth capital spending — in the form of direct capital investments, grants to the states and territories for capital purposes and investments in financial assets for policy purposes — was very little changed,” says Cherelle Murphy and Jack Chambers, members of ANZ’s Australian economis team
“The increase lifts capital spending by 0.1% of GDP or less each year, with newly announced projects already allocated funding last year.”
This chart from ANZ shows the government’s projections for capital spending in the budget in both dollar-terms and as a percentage of GDP.
The latest budget estimates are much the same as the previous budget, slowly pulling back from the record dollar spend seen in the current financial year.
On the increase in capital investment in 2017/18, Murphy and Chambers say this was related to the Commonwealth’s purchase of the New South Wales and Victorian Government’s Snowy Hydro equity, rather than linked to new infrastructure.
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